Post-Office Monthly Income Scheme

What is a Post-Office Monthly Income Scheme?

Usually known as POMIS, the post-office monthly income scheme is a Government backed savings investment. This account assures regular monthly income with a current interest rate of 7.7% per annum.

There are no tax benefits and TDS on this scheme. While computing income tax, the interest is treated as income from other sources.

The account can be opened with a minimum investment sum of Rs. 1,500. You can also close this account prematurely after paying penalty for early withdrawal or closure.Risk averse investors seeking guaranteed regular returns from savings. Those not looking for regular income.

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1. Highlights
2. Investment Goal
3. Overview
4. Capital & Inflation Protection
5. Guarantees
6. Liquidity
7. Tax Implications
8. New Account Setup Information
9. Online Access
10. Key Takeaways

Highlights

• Risk: It is completely risk-free making it the best choice for risk averse investors.
• Returns: The scheme currently offers an interest rate of 7.7% p.a. and is lined with G-sec rates.
• Taxation: The interest earned is treated as “income from other sources” and taxed accordingly.
• Lock-in Limitations: 5 years.
• Withdrawals: Premature withdrawals are subjected to penalty.
• Capital Protection: It is a Government scheme so the capital is completely secure.
• Inflation Protection: When inflation is above interest, the account earns no real returns.

Investment Goal

It is an Indian Government initiative with the objective to provide a risk free scheme to conservative investors, that yields guaranteed monthly returns and helps them earn a regular income.

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Overview

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Capital & Inflation Protection

Since this scheme is provided by the Indian Government, your investments are completely risk-free. There is no protection when the rate of inflation is more than the rate offered by the post-office monthly income scheme. Hence the account earns no real returns.

Guarantees

The interest rate currently is 7.7% per annum. Once the investor has made his deposit, the interest (in line with G-secs of similar maturity and a spread of 0.25%) won’t change and will be notified every quarter.

Liquidity

• Premature withdrawal is permissible post 1 year of account opening, however you are subjected to penalty that varies between 1-2%, based on account tenurity.
• Closure on or before 3 years of account opening reduces 2% of the deposit and you receive the balance. Post 3 years, 1% of the deposit is deducted and treated the same.

Tax Implications

• No tax benefits.
• The interest amount on maturity is treated as income from other sources and taxed accordingly.
• No tax is deducted at source (TDS).

How to open?

An account can be opened in any head or general post-office with the following requirements:

• To link monthly payout, you must open a post-office savings account
• Account opening form.
• Passport size photographs – two
• Aadhar card or acknowledgement of application in its absence.
• Address and Identity Proof such as: PAN, Aadhar Card, declaration of Form 60 or 61, Driver’s License, Voter’s ID or Ration Card. (Carry originals of ID proof during account opening for verification purpose.)
• Opt a nominee.

How to operate?

The account holder must use a pay-in-slip and credit the initial account opening amount to his/ her account.

Online Access

This scheme has no online options yet.

Key Takeaways

• Investors earn guaranteed returns with POMIS.
• No tax benefits and no TDS.
• The scheme’s interest rates are aligned with G-secs of similar maturity and does not provide inflation cover.
• You can transfer the account from one post-office to another.

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